01 August 2023
If you are covering Diageo’s latest financial results, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“The results from Diageo today paint a bit of a mixed and complicated story for the drinks giant. We knew sales in China will have slowed as a result of lockdown, however, North America is also falling despite consumer spending holding up and the economy proving to be robust. The post covid normalisation is happening later in the spirits industry than in other categories.
“Sales are still growing, but this is all due to price increases, rather than volumes. This is okay, premium brands are doing well but some subsidiary brands are struggling and Diageo is being a little vague in when they expect improvement to happen. The business talks about ‘gradual improvement’ over time, not giving any firm expectations. This will leave it with some questions to answer, and for a quality business like Diageo, we would expect it to turn the ship around in good time but with timeframes attached.
“Interestingly, the business is moving its accountancy to dollars, away from pound sterling currently. This is highlights that it sees the US as its most important, and biggest, market, and it is a reflection of the global world we now live in. This will impact UK investors as it now means the dividend payments to them will be impacted by currency moves. Further appreciation of sterling would have a significant impact.”
